Hub of Industry

When California contractors think concrete, they think Hub.

Contractor Supply Magazine, June/July 2013
Hub Construction Specialties’ CFO/COO Ed Dainko (L), owner Bob Gogo (C), and operations manager Tom Holod (R) work together to maintain Hub’s reputation as California’s premier concrete construction supplier.

By Tom Hammel, Contractor Supply Magazine

California has more landmarks per square
mile than almost anywhere on Earth, and in the world of concrete construction, Hub
Construction Specialties, Inc. is one of them.

I first sat down in Bob Gogo’s office in 1998 but at that time he had already been using the same office for nearly 15 years and had been in business for over 40. All told, Bob Gogo and Hub have served California’s concrete industry through 11 presidents, three wars and nine recessions.

“I’ve seen them all,” Gogo says. “I was born in 1928.  I graduated from high school in 1945, went to college, got drafted and served in Korea. (In the Army I was taught typewriting — nearby men were learning to use heavy equipment. I learned that from my dad, an underground contractor, when I was 15 years old. That typing came in handy in the early years.)

"I started this business in 1957 in a San Bernardino garage. Today, we have 14 stores. Here in San Bernardino we have several buildings and yards that cover about 12 acres, all within a few blocks of each other.”

Those buildings include Hub’s home branch and yard complex, a rental staging and maintenance yard, product and bagged goods warehousing and a rebar fabrication facility. The San Bernardino Mountains provide a backdrop for them all.

Gogo’s experience with business cycles, gleaned from a family background, instilled a conservative approach to growth that helped Hub avoid the fate of other California companies that grew too quickly during the boom years of the late 1990s and mid 2000s only to implode under the pressures of recession and debt-fueled mass. The result: Hub remains in business where other distribution companies have vanished. Of Hub’s 14 stores, 13 are in California and one is in Lake Havasu, Arizona.

“The ESOP definitely helped get us through the recession.”  
— Bob Gogo

Concrete, concrete, concrete!
For virtually all of its existence, Hub has been known as the concrete contractor’s source for anything relating to concrete installation. The company’s specialties include concrete forming systems, rebar fabrication, tilt-up bracing, grouts, mortars, colorants and of course, tools and supplies.

“We supply anything and everything related to concrete — forming, curing, placing — and coloring, too,” he says. “And of course we do a great deal of tilt-up; we have been supplying tilt-up construction for 40 years or more.”

Hub rents forming systems, braces and lifting hardware and sells inserts and other products consumed in the tilt-up process.

“When you’re involved in the concrete phase of the building, you’re selling a lot of products — the floor hardener, forms, backers on the forms, timber strand and so on. You’re selling a lot of material on that building itself.”

And those projects can get large. One of the jobs Hub is currently supplying is a 1.7 million square foot tilt-up distribution center. Hub sells concrete products but rents many as well.

“The ESOP is a powerful tool in many ways, but first as an employee benefit.”
— Ed Dainko

Ed Dainko, CFO/COO, says “We rent all sorts of products — saws, compressors, generators and things like that, but primarily our rental fleet deals with forming devices and tilt-up braces. We own a number of the systems that we rent out. Our rental yard is five acres filled to the gills and most of our inventory is in the field working.”

“Quick-Form is very popular for building walls and we have a lot of it,” Gogo adds. “Our motto is, ‘Hub Has It.’”

Hub’s “Hub”
The San Bernardino branch also serves as the central ordering and distribution center for the company. Purchasing manager Joe Crance, has been with Hub since 1977 and many people help him with procurement.

“Our main store, rental yard, fab yard and central distribution are all centered right here,” Dainko says. “We do a majority of the ordering for the company from here, but most of the branches can also order material.  A branch may order special items — non-stock products — for a contractor.  As long as it’s sold, they can buy it.”

“There are also cases where, when the branch is large enough and we have the right people there, we allow them to buy stock direct into the branch,” Gogo adds.

Bad weather - It’s not always sunny
For many businesses, the lure of California’s weather is offset by its inhospitable tax climate.

“California is a tough place to do business, I’ll tell you that right now,” Gogo notes. “Taxes here are just unbelievable. We get a little break on property taxes because we have been here so long, but that is just one cost of doing business here. Regulations are enormously difficult to deal with out here; we struggle with them.”

“If you have a fleet of more than three trucks, the rules govern how old they can be before you must retire them and take them off the road," Gogo said. "Last year we had to replace 24 perfectly fine-working trucks because the CARB regulations said they couldn’t be on the road anymore. It cost us $2 million just to dispose of perfectly good vehicles."

One case in point is Hub’s fleet. A few years ago the California Air Resources Board issued new rules on the allowable age of trucking fleets.

“If you have a fleet of more than three trucks, the rules govern how old they can be before you must retire them and take them off the road. Last year we had to replace 24 perfectly fine-working trucks because the CARB regulations said they couldn’t be on the road anymore. It cost us $2 million just to dispose of perfectly good vehicles. The same rules applied to forklifts, so we had to replace about 20 forklifts a few years back in one shot as well.”

Private labeling: If it says Hub on the label . . .
Private label products are Hub’s competitive calling cards in the California supply market. Al Hannah, Hub’s long time VP of sales, created the program in the 1980s and it has grown ever since. Hub-brand products, from Hubtube, caution tape and safety cans to Hub 100 Grout and mortar products are now requested by name on job sites in every market where Hub has branches. Hannah started with Hub in 1965. After 45 years with Hub, Hannah retired at the end of 2010.

Private label products are Hub’s competitive calling cards in the California supply market. Hub-brand products, from Hubtube, caution tape and safety cans to Hub 100 Grout and mortar products are now requested by name on job sites in every market where Hub has branches.

On occasion, Hub private labels products for customers, typically safety products for a contractor, but the majority is straight Hub-brand product.  

Marketing the brand
Promoting the Hub brand and Hub-branded products falls to Randy Smith, Hub’s marketing director. Smith manages some of the private label product branding, all of the company’s sales flyers, its newsletter, website and some new product lines. Hub also produces a 450-plus page annual catalog.

“Our marketing and IT department takes care of all of it — the sales flyers, the newsletter and website,” he says. “A strong new sales feature is the Virtual Order Desk. Our customers, new and old, can create an account, log on, request quotes, place orders, all kinds of stuff.”

“The monthly newsletter typically features a product of the month, construction news articles and specials from different manufacturers,” Smith adds. “We promote those in the newsletter, on the website and in handout flyers at the branches. We try to send out flyers out with every delivery and with our outside sales guys.”

As the national economy improves, “The message Hub promotes through all our avenues is what Hub can do for our customers — provide quality products at a competitive price with outstanding product knowledge,” Smith says. “That’s how we go into the marketplace and that’s where we have found our niche.”

Being the brand: Hub’s ESOP
The private label program puts Hub’s “name and face” on job sites even when its salespeople are not present, but contractors can “feel” the Hub difference too, in a way that may end up being a much stronger seller for Hub than any private label product ever could be. Hub’s people are its greatest strength, and since 1995, Hub has been an ESOP (Employee Stock Ownership Program) company. Each eligible employee is also an owner. Nothing inspires professionalism better than having some “skin in the game,” and having an ESOP in place makes a world of difference for owners and employees both, especially when the going gets rough.

Hub employees recondition concrete forms in one of Hub's San Bernadino yards. Being part of an ESOP company give employees a sense of ownership, pride in their work and increases their dedication to the company and to working toward its success.

For employees, an ESOP is often thought of as a long-term retirement benefit. An ESOP can begin paying benefits for employers from day one in improved employee morale, attendance and productivity, especially when employees understand their benefits. ESOP employees are often more loyal to their companies. But like all employee benefits, value must be well communicated. After the ESOP was launched, Gogo and Dainko discovered that Hub’s ESOP wasn’t being effectively communicated to employees.  

“I’ve been here for 35 years and always loved the company, so the ESOP is icing on the cake for me.”
— Tom Holod

“That actually happens a lot more often than people realize,” Dainko explains. “The ESOP is a powerful tool in many ways, from taxes to exit strategy, but first as an employee benefit.”

Dainko, then Hub’s CPA, stepped in and helped Gogo conduct meetings with employee groups, husbands and wives, on the benefits of their ESOP program. Dainko’s long involvement in the company, which began when he was a teenager working in the yard on summer breaks and later as accounting consultant, eventually led Gogo to offer him a position in the company.

“And ever since we have been communicating the benefits of the ESOP. It has helped create a strong feeling of business ownership, especially when getting through tough times,” Dainko says. “You’re dealing not just with employees, you’re dealing with employee owners.  They understand the difficult decisions businesses sometimes have to make to get through tough times, and they not only accept those decisions, they understand, embrace and work through them.”

“The ESOP has rewarded our employees’ longevity with the company,” Gogo says. “It’s been a huge factor in reducing turnover and maintaining employee morale. The ESOP definitely helped get us through the recession.”

Hub Construction Specialties
at a Glance
Founded: 1957
Ownership: Privately held
Locations: Bakersfield, Fresno, Glendale, Indio, Murrieta, Oakland, Ontario, Rancho Cordova, San Bernardino, San Diego, San Marcos and Santa Ana, Calif.: Lake Havasu, Ariz.
Markets: Concrete construction
Services: Tool, supply and forming system rentals and delivery
Line Card: (Advertisers this issue are linked below) 3M, ADA Solutions, Aearo, Aervoe, Allen Engineering, Ardex, Bartell Morrison, Benner-Nawman, Black & Decker, Bosch, Chapin, CTS Cement, DAP, Dayton, DEWALT, Echo, Ellwood Safety, Five Star Products, Fomo, Freud, Glaze-N-Seal, Greenstreak, Hitachi,
Honda, Husqvarna, ICS Blount, Irwin/Lenox, ITW Epcon, Jackson Safety, Klein Tools, Knaack Weather Guard, Lifeguard Waterproofing, Loctite, Makita,
Mapei, Marshalltown Trowel, MCC USA, Milwaukee, Mi-T-M, Minnich, MSA, Multiquip, Norton, RapidSet, Relton, Rolair, Safewaze, Showa Best Glove, Sika, Simpson Strong-Tie, Stego Industries,
Thermal-Chem, Thoroseal, Vibra Strike, W.R. Meadows, Weyerhaeuser
Affiliations: STAFDA, Evergreen
Marketing Group

Like many ESOP companies of Hub’s age and ownership position, Gogo maintains majority control. The ESOP owns somewhat less than 50 percent of the company stock. Hub’s program follows the industry standard six-year vesting schedule. After six years with the company, an employee is 100 percent vested.

Because it was a great place to work even before Gogo created the ESOP, many Hub employees measure their time with the company in decades, not years. So why go though the work to create an ESOP at all?

“Bob has always had a strong kinship with the workers and employees at Hub,” Dainko explains. “The Hub family is like a second family for him and Bernice, who still works for the company. She still has her “home office” just like she did in 1964, well before everyone wanted offices and computers in their homes. She remains very active in the business. This is very much a jointly run operation."

“Bob and Bernice realize that the good fortune they’ve had with this company was achieved with their own hard work, as well as that of all their employees. They wanted to acknowledge those contributions and to reward their employees for those years of loyal service — and give something back to the employees for helping build this great company.”

Another benefit of an ESOP is that it is essentially a de facto succession plan. The owner can choose to retain his percentage of ownership for life, or, when he deems the time is right, he can sell out — back to the company and its owner-employees themselves. The ESOP’s greatest value is that Hub’s future course — and the security of its employees — has been assured since 1995.

“We believe our ESOP and the role it is playing in the success of our company will be of great interest to Contractor Supply readers,” Dainko says. “It really has had a huge impact on our sustainability and the longevity of our employees. Our ESOP gives our employees purpose and we all want purpose in our lives. It heightens and adds to the sense of purpose in our mission here at Hub.”  

“Customer service comes first and foremost but there are other reasons for doing the best we can,” he adds. “Our people know they can make a difference and be rewarded for their contributions. I feel this helps sustain our morale at Hub.”

Tom Holod, Hub’s operations manager, agrees. “Everybody who works here is part of the ESOP and we all know that someday that benefit will be there for us if we do a good job, so it behooves us to do a good job. I’ve been here for 35 years and always loved the company, so the ESOP is icing on the cake for me.”

When I mention how impressive it is to see him still working every day, Bob Gogo corrects me, “Not every day, I only come in five days a week.” But at 85, he admits that he is beginning to slow down. He has led Hub Construction Specialties, Inc., through 55-plus years of boom and bust. Thanks to his vision and the generosity of the Hub ESOP program, Hub’s future is as certain as the fact that in southern California, it will be another sunny day tomorrow — and the day after that. For concrete contractors, that’s weather you can count on. CS